A Century of Vertical Fiscal Imbalance in Australian Federalism

Abstract

After a century of Australian fiscal federalism, while the problems posed by horizontal fiscal imbalance have largely been resolved, the thorny issue of vertical fiscal imbalance remains. After reviewing the evolution of economic doctrine on fiscal federalism, this paper examines the historical evolution of vertical fiscal imbalance in the light of the views expressed by Australian economists over the past century. It is argued that the perceptions of Australian economists largely reflect wider currents in mainstream economics, with an early ‘pragmatic’ view, an orthodoxy based around the dominant economic theory of fiscal federalism and a ‘dissenting’ school associated with Groenewegen.